- Strategic Transaction is Mutually
Beneficial to Shareholders of Both Companies
- Enhances the Scale and
Diversification of Annaly’s Unrivaled Investment Platform
- Accretive to Annaly’s Core Earnings
Per Share of Common Stock and Aligns with Annaly’s Current Risk
Profile and Capital Allocation Strategy
- Provides Immediate and Tangible Cost
Savings to Shareholders
- Increased Equity Base and Access to
Capital Supports Continued Growth
- Reinforces Annaly’s Stature as a
Market Leader and Industry Consolidator
- MTGE Shareholders to Have a Cash /
Stock Election with Aggregate Transaction Consideration to Consist
of Approximately 50% Annaly Shares and Approximately 50%
Cash
- Transaction Expected To Close During
the Third Quarter of 2018
Annaly Capital Management, Inc. (“Annaly”) (NYSE:NLY) and MTGE
Investment Corp. (“MTGE”) (Nasdaq:MTGE) today announced the signing
of a definitive merger agreement under which Annaly will acquire
MTGE for consideration to be paid in cash and shares of Annaly
common stock, which values MTGE at $19.65 per share of MTGE common
stock based upon the closing price of Annaly common stock on April
30, 2018. The value of the consideration represents a premium of
approximately 12% to the 60-day volume-weighted average price of
MTGE common stock ending on April 30, 2018.
Subject to the terms and conditions of the merger agreement, a
wholly-owned subsidiary of Annaly will commence an exchange offer
to acquire all outstanding shares of MTGE common stock. For each
share of MTGE common stock validly tendered in the exchange offer
or converted pursuant to the second-step merger described below,
MTGE shareholders may elect to receive: (a) $9.82 in cash and
0.9519 shares of Annaly common stock; (b) $19.65 in cash (the “Cash
Consideration Option”); or (c) 1.9037 shares of Annaly common stock
(the “Stock Consideration Option”). MTGE shareholders who elect the
Cash Consideration Option or Stock Consideration Option will be
subject to proration, in each of the exchange offer and the
subsequent second step merger, so that the aggregate consideration
will consist of approximately 50% of Annaly’s common stock and
approximately 50% in cash. In addition to the above consideration,
Annaly would assume the existing notional $55 million in MTGE
8.125% Series A cumulative redeemable preferred stock.
The transactions contemplated by the merger agreement, including
the exchange offer and the merger, have been approved by the Board
of Directors of Annaly and approved by the Board of Directors of
MTGE upon the recommendation of the Special Committee of the MTGE
Board of Directors, which is comprised entirely of independent
directors (the “MTGE Special Committee”).
“This transaction is another milestone in Annaly’s successful
history as a disciplined, market leading consolidator,” commented
Kevin Keyes, Chairman, CEO and President of Annaly. “The
acquisition of MTGE adds complementary assets across three of our
four businesses, deepens the breadth of our investment
alternatives, is accretive to earnings and provides immediate cost
savings and efficiencies to shareholders. This strategic
acquisition further enhances our capital base to support continued
growth of our investment platforms and creates tremendous value for
both of our companies’ shareholders. This marks our third
transformative acquisition and solidifies Annaly’s position as the
market leader in our industry.”
Randy Dobbs, Chairman and Lead Independent Director of MTGE,
said: “We are excited to have reached an agreement with Annaly for
the sale of our company and expect that our shareholders will
benefit from the increased diversification, scale and liquidity of
the Annaly platform.”
Transaction Highlights
- Enhances the scale, liquidity and
access to capital of Annaly’s platform: A pro-forma equity base
of over $14 billion supports the continued growth of all investment
businesses
- Increases investment diversification
and optionality: MTGE’s portfolio, which consists of agency and
non-Agency residential mortgage backed securities and investments
in triple net-leased healthcare real estate, is complementary to
Annaly’s existing businesses and expands the number of investment
options to 37, furthering Annaly’s ability to pivot as market
dynamics change. Pro forma for the transaction, Annaly will have
27% of its capital allocated to credit assets
- Accretive to earnings:
Transaction is expected to be accretive to Annaly’s core earnings
per share in 2018 and is aligned with Annaly’s current risk profile
and capital allocation strategy
- Enables MTGE shareholders to benefit
from a more efficient operating platform: Through ownership of
Annaly common stock received in conjunction with the transaction,
MTGE’s shareholders will benefit from significant and tangible cost
efficiencies generated by Annaly’s scalable operating model as well
as participate in upside of shares of Annaly stock
- Reinforces Annaly’s stature as
industry leader: Acquisition of MTGE further reinforces Annaly
as the largest and most liquid diversified mortgage REIT in the
world and would represent Annaly’s 3rd successful acquisition since
2013, with a combined value of approximately $3.3 billion
- Provides a meaningful premium to
MTGE’s common stock price: The value of the consideration
represents a premium of approximately 12% to the 60-day
volume-weighted average price of MTGE’s common stock ending on
April 30, 2018 based upon the closing price of Annaly common stock
on April 30, 2018
- MTGE shareholders may elect between
cash and stock consideration or a combination of both: MTGE
shareholders will have an ability to elect between cash and stock
consideration (or a combination of both cash and stock
consideration), subject to proration rules such that the aggregate
transaction consideration will consist of approximately 50% of
Annaly’s common stock and approximately 50% in cash
Prior to closing, each of Annaly and MTGE will declare for their
respective shareholders a pro rata common dividend based on its
last regular quarterly dividend declared prior to closing and the
number of days elapsed since the record date for the most recent
quarterly dividend, as of the day immediately prior to the closing
date.
The exchange offer is subject to customary closing conditions,
including the tender for exchange of a majority of all then
outstanding shares of MTGE common stock when added to any shares of
MTGE common shares owned by Annaly and its wholly-owned
subsidiary. Following completion of the exchange offer, the
parties will promptly effect a second-step merger without the
approval of MTGE shareholders under Maryland law pursuant to which
all remaining shares of MTGE common stock not tendered in the
exchange offer will be converted into the right to receive the same
consideration as in the exchange offer, with the same election
options and subject to the same proration rules. The
transaction is expected to close during the third quarter of
2018.
Wells Fargo Securities, LLC and Sandler O’Neill + Partners, L.P.
served as financial advisors to Annaly, and Wachtell, Lipton, Rosen
& Katz served as legal counsel to Annaly. Barclays Capital Inc.
served as financial advisor to the MTGE Special Committee, and
Cooley LLP served as legal counsel to the MTGE Special
Committee.
Conference Call
Annaly will hold a conference call on May 3, 2018 at 10:00 A.M.
Eastern Time to discuss this transaction and Annaly’s quarterly
earnings. The number to call is 888-317-6003 for domestic calls and
412-317-6061 for international calls. The conference passcode is
5191574. There will also be an audio webcast of the call on
www.annaly.com. If you would like to be added to the e-mail
distribution list, please visit www.annaly.com, click on Investor
Relations, then select Email Alerts and complete the email
notification form.
About Annaly
Annaly is a leading diversified capital manager that invests in
and finances residential and commercial assets. Annaly’s principal
business objective is to generate net income for distribution to
its shareholders and to preserve capital through prudent selection
of investments and continuous management of its portfolio. Annaly
has elected to be taxed as a real estate investment trust, or REIT,
for federal income tax purposes. Annaly is externally managed by
Annaly Management Company LLC. Additional information about Annaly
can be found at www.annaly.com.
About MTGE Investment Corp.
MTGE Investment Corp. is a real estate investment trust that
invests in and manages a leveraged portfolio of agency mortgage
investments, non-agency mortgage investments and other real
estate-related investments. The company is externally managed and
advised by MTGE Management, LLC, an affiliate of AGNC Investment
Corp. (Nasdaq: AGNC). For further information, please refer to
www.mtge.com.
Forward-Looking Statements
This communication includes forward-looking statements. These
forward-looking statements generally can be identified by phrases
such as “will,” “expects,” “anticipates,” “foresees,” “forecasts,”
“estimates” or other words or phrases of similar import. Similarly,
statements herein that describe the proposed transaction, including
its financial and operational impact, and other statements of
management’s beliefs, intentions or goals also are forward-looking
statements. It is uncertain whether any of the events anticipated
by the forward-looking statements will transpire or occur, or if
any of them do, what impact they will have on the results of
operations and financial condition of the combined companies or the
price of Annaly or MTGE stock. These forward-looking statements
involve certain risks and uncertainties, many of which are beyond
the parties’ control, that could cause actual results to differ
materially from those indicated in such forward-looking statements,
including but not limited to the ability of the parties to
consummate the proposed transaction on a timely basis or at all and
the satisfaction of the conditions precedent to consummation of the
proposed transaction, including a majority of MTGE’s common shares
being validly tendered into the exchange offer; that required
regulatory approvals for the proposed transaction may not be
obtained in a timely manner, if at all; business disruption
following completion of the merger; and the other risks and
important factors contained and identified in Annaly’s and MTGE’s
filings with the Securities and Exchange Committee (“SEC”),
including their respective Quarterly Reports on Form 10-Q and
Annual Reports on Form 10-K, any of which could cause actual
results to differ materially from the forward-looking statements.
The forward-looking statements included in this communication are
made only as of the date hereof. Neither Annaly nor MTGE undertakes
any obligation to update the forward-looking statements to reflect
subsequent events or circumstances, except as required by law.
Additional Information and Where to Find It
The exchange offer referenced in this communication has not yet
commenced. This communication is for informational purposes only
and is neither an offer to purchase nor a solicitation of an offer
to sell shares, nor is it a substitute for the exchange offer
materials that Annaly and its merger subsidiary will file with the
SEC. At the time the exchange offer is commenced, Annaly and its
merger subsidiary will file a tender offer statement on Schedule
TO, Annaly will file a registration statement on Form S-4 and MTGE
will file a Solicitation/Recommendation Statement on Schedule 14D-9
with the SEC with respect to the exchange offer. THE OFFER
MATERIALS (INCLUDING AN OFFER TO EXCHANGE, A RELATED LETTER OF
TRANSMITTAL AND CERTAIN OTHER OFFER DOCUMENTS) AND THE
SOLICITATION/RECOMMENDATION STATEMENT WILL CONTAIN IMPORTANT
INFORMATION. MTGE SHAREHOLDERS ARE URGED TO READ THESE DOCUMENTS
CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION THAT HOLDERS OF MTGE SECURITIES SHOULD
CONSIDER BEFORE MAKING ANY DECISION REGARDING EXCHANGING THEIR
SECURITIES. The Offer to Exchange, the related Letter of
Transmittal and certain other exchange offer documents, as well as
the Solicitation/Recommendation Statement, will be made available
to all holders of MTGE common stock at no expense to them. The
exchange offer materials and the Solicitation/Recommendation
Statement will be made available for free at the SEC’s website at
www.sec.gov. Additional copies may be obtained for free by
contacting Annaly’s Investor Relations department at 1-888-8Annaly
(1-888-826-6259).
In addition to the Offer to Exchange, the related Letter of
Transmittal and certain other exchange offer documents, as well as
the Solicitation/Recommendation Statement, Annaly and MTGE file
annual, quarterly and current reports and other information with
the SEC. You may read and copy any reports or other information
filed by Annaly and MTGE at the SEC public reference room at 100 F
Street, N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference
room. Annaly’s and MTGE’s filings with the SEC are also available
to the public from commercial document-retrieval services and at
the website maintained by the SEC at http://www.sec.gov.
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